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CANADA STOCKS-TSX drops to over a month low as energy, financial stocks drag

(Adds analyst quote, updates prices)

By Aniruddha Ghosh

Sept 6 (Reuters) - Canada's main stock index fell on Tuesday as energy and financial stocks declined, with investors betting on an outsized rate hike from the Bank of Canada later this week.

At 10:26 a.m. ET (14:27 GMT), the Toronto Stock Exchange's S&P/TSX composite index was down 123.12 points, or 0.64%, at 19,147.73.

The energy sector dropped 1.5% as crude oil fell after a two-day rally on renewed concerns over weaker demand and the prospect of more interest rate hikes, trumping support from the first output target cut since 2020 by OPEC+.

The financials sector logged its worst day in more than two years, losing 3.6%, while the industrials sector rose 2.09%.

"As the Bank of Canada (BoC) is expected to announce an interest rate hike on Sept. 7, investors could remain skeptical during the trading session on Tuesday," said Kunal Sawhney, chief executive officer of equity research firm Kalkine Group.

Traders see a 94% chance of a 75-basis-points rate hike at the BoC policy meeting on Wednesday, lifting its policy rate into restrictive territory for the first time in two decades, but bets are split on whether or not a pause will follow.

Meanwhile, Canada's soaring house prices will decline sharply next year, but still not enough to make them affordable, Reuters polls showed. [nL1N3090TV ]

Last week's selloff has brought the Toronto market index 5.6% closer to its mid-July trough and about 13% below its record high in April.

The TSX was closed on Monday for the Labour Day holiday. (Reporting by Aniruddha Ghosh in Bengaluru; Editing by Anil D'Silva and Vinay Dwivedi)

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